The U.S. Internal Revenue Service (IRS) has updated its instructions for disclosing crypto activities. The update provides clarification on who must answer “yes” to the IRS’ crypto question and when it is appropriate to select “no” as the answer.
IRS Publishes New Crypto Tax Filing Instructions
The IRS published updated instructions for Form 1040 on Dec. 31. They include additional information on how to answer the cryptocurrency question on the main tax form used by individuals to file U.S. tax returns.
The first question on Form 1040 is about cryptocurrency. It reads: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” Taxpayers only need to answer “yes” or “no” to this question.
According to Cryptotrader Tax, a crypto tax software company, the IRS now requires taxpayers who purchased cryptocurrency in 2020 to answer “yes” to the crypto question on Form 1040 — not just if they sold,